INTRATESCLASS - 1 Interest Rates simple and compound...

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Unformatted text preview: 1 Interest Rates simple and compound interest discrete and continuous compounding and growth and rule of 72 Present value,discounting and Yield to maturity Consols=Perpetuities P=C/r 1 Bond pricing and yield (bugs bond val) coupon rate, current yield, yield to maturity, yield to call, zero coupon bonds and maturity Discounted dividends model P=D/(r-g) Nominal vs real rates Fishers equation Course Issues No class for US next week Assignment 13 due AFTER thanksgiving break Extra Credit-this week Clicker updates 2 Investment Game Round 4 Bonds Advisement Final Exam Info next week Interest Rates Cost of borrowing/ return for lending funds Price or rental price Why? pain of deferring, pleasure/benefit of present consumption APR - yield to maturity correct measure, includes all costs, annualized. Regulation Z- 3 Truth in Lending Act APY annualized return 2 More Nominal rate = # of dollars expressed as % of amount Real rate-what you can buy with $ adjusted for inflation r real = r nominal exp inflation Or r nominal= r real + exp inflation Real rate should matter in decisions In SR, with inflation unchanging, real correlated with nominal Return (rate of return) total % gain/loss Interest earned + capital gain/loss 4 Interest Rates 5 Yields & Spreads 6 3 Compound growth...
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INTRATESCLASS - 1 Interest Rates simple and compound...

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